Incident: Recently, China Satellite Communications released its 2024 semi-annual performance forecast. It is estimated that net profit due to mother will be about 0.411 billion yuan in the first half of 2024, an increase of about 0.145 billion yuan over the same period of the previous year, an increase of about 54% over the same period last year; net profit deducted from non-return to mother for the first half of the year is expected to change little compared to the same period last year. Looking at a single quarter, according to the performance forecast, 2024Q2 achieved net profit of about 0.303 billion yuan, an increase of about 0.178 billion yuan over the previous year, and an increase of about 142% over the previous year, mainly due to insurance claims matters.

Agreements were reached with insurance underwriters, and China Star 6C Insurance's claims increased the company's profits. The company's performance in 2023 was affected by the loss of life due to the failure of the Zhongxing 6C thruster. The company filed a claim procedure with the chief contractor for the Zhongxing 6C satellite insurance policy in accordance with the provisions of the Star Group in-orbit insurance policy. On June 24, 2024, the company issued an announcement stating that it had reached an agreement with the insurance insurer on the compensation plan and signed a “Liability Cancellation Agreement”. It can obtain insurance claims of approximately USD 32.2174 million from the insurance underwriter, accounting for 66% of the company's net profit due to the 23 year net profit. It is approximately RMB 0.234 billion based on the spot exchange rate of 7.2585 US dollars to RMB (July 12, 2024).

Formulate a “quality and efficiency improvement” plan to further consolidate long-term competitive advantage and growth momentum. On June 27, 2024, the company formulated the “2024 “Improve Quality, Efficiency, and Value Return” Action Plan, which emphasizes increasing returns to investors and leading the development of new productivity through innovation. In 2024, the company will focus on enhancing core capabilities, continuously optimizing the global network layout, promoting the development plans for the Zhongxing 10R and Zhongxing 9C satellites in an orderly manner, building an original technology source for satellite communication, and promoting business growth and ensuring the company's high-quality development.

It is a leader in high-orbit satellite Internet construction, and the aviation, navigation and other industries continue to expand. The company has initially built China's first high-throughput satellite Internet that fully covers the entire territory of China and key countries and regions along the “Belt and Road”, and continues to expand on the application side of the industry. On February 26, 2024, the company launched consumer-grade satellite Internet products and cooperated with airlines to launch an aviation satellite Internet product traffic package to provide customers with networking services equivalent to 4G fluency during aircraft flights; the “Starfish Connect” global network service has covered more than 95% of the world's maritime routes.

Profit forecast: China Satellite Communications is China's national communications and broadcasting satellite operating team. It is optimistic about the expansion of the company's high-orbit satellite Internet in aviation, navigation and other applications. Considering the impact of insurance claims, the company is expected to achieve operating income of 3.088/3.543/3.99 billion yuan and net profit to mother 0.632/0.697/0.798 billion yuan in 2024-2026, corresponding to EPS of 0.15/0.17/0.19 yuan, maintaining a “buy” rating.

Risk warning: The expansion of the satellite application market fell short of expectations, and the satellite had a major failure in orbit.